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Contract conditions
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Workshop 4FIDIC Contracts (Update on New Documents)
Philip Jenkinson
Tuesday, 04 October 2011, 14.00 15.30
An Overview of the FIDICFORMS OF CONTRACTand Contracts Committee
2Annual Conference 2011Contracts Workshop
An Overview of the FIDICFORMS OF CONTRACT
and Contracts Committee Activities
Philip JenkinsonChair of the FIDIC Contracts Committee
Principal Consultant ATKINS
Objectives
Educational and informative Identify and prioritise industry issues Assess barriers, opportunities and risks Identify potential actions (by FIDIC/CC) Identify milestones, success factors and
how to assess or measure progress
3
4Consultancy Agreements
Client/Consultant Model Services Agreement, Fourth Edition 2006
Sub-Consultancy Agreement, First Edition 1992
Joint Venture Agreement, First Edition 1992
Model Representative Agreement, Test Edition 2004
5The Traditional FIDIC Forms of Contract
Conditions of Contract for Works of Civil Engineering Construction (Red Book) Fourth Edition 1987
Conditions of Contract for Electrical andMechanical Works including Erection onSite (Yellow Book) Third Edition 1987
6Basics Between Employer and Contractor Red Book: payment monthly for work done Yellow Book: lump sum on milestones
Every project is unique Guidelines of best practice Part I General Conditions Part II Conditions of Particular Application
7Fair and balanced approach Risk is allocated to the party that is best able
to bear and control that risk Compensation and time extension allowed
when uncalculated hindrances occur Engineer whose job is principally to
supervise and monitor the work in strict accordance with the Contract to the
satisfaction of the Engineer with formal Engineers Decision
8The Orange Book Conditions of Contract for Design-Build and
Turnkey (Orange Book) First Edition 1995 Employers Representative
not required to be impartial determine matters fairly, reasonably and in
accordance with the Contract Independent dispute adjudication board
1996/7 Supplements for use of DAB (R/Y Books)
9The 1999 Suite of Standard Conditions of Contract
Conditions of Contract for Construction - design by Employer: The Construction Contract (The New Red Book)
Conditions of Contract for Plant and Design-Build- design by Contractor: The Plant and Design/Build Contract (The New Yellow Book)
Conditions of Contract for EPC Turnkey Projects: The EPC/Turnkey Contract (The Silver Book)
Short Form of Contract: The Short Form (The Green Book)
The FIDIC Contracts Guide (2000)
10
Principles behind the1999 Books
More consistent wording, with improved clarity; user-friendly format and layout
Balance between legal precision and practicability; compatible with both common and civil law concepts
Manuals of good engineering practice Prepared by engineers for practical use
11
Principles (continued)
Traditional role of the Engineer to make impartial determinations modified to reflect current practice (Red and Yellow Books)
Employers Representative introduced: must be fair and reasonable (Silver and Green Books)
12
Principles (continued) Distinction between the Books is based
on: who does the design? who bears the risk for change in
quantities? EPC (Silver Book) provides for the
Contractor taking almost all risks (new for FIDIC)
Short Form (Green Book) deals with the wide demand for a simpler form of contract
13
Principles (continued)
Work must continue, regardless of differences: amicable settlement encouraged
Strong financial management: detailed claims procedures must be followed
14
General Remarks onthe 1999 Books
Suitable for both international and domestic use
A framework adaptable to suit local law
More definitions: harmonised, except for the Short Form
15
General Remarks (continued)
General Conditions not applicable can be disregarded
Example Particular Conditions are given
Adjudication precedes arbitration
16
The 1999 Red and Yellow Books
Emphasis changed to party responsible for design
1999 Yellow Book replaced both 1987 Yellow Book and Orange Book
Traditional competitive tendering procedures Risk sharing is balanced All claims, from either Party, have to follow a
strict procedure Engineer is no longer stated to be impartial:
he shall be deemed to act for the Employer, except when fair determinations are required
17
The 1999 Red Book
For building and engineering works designed by the Employer
Needs of modern multi-discipline contracts recognised
Partial Contractor design possible Valuation and payment based on
remeasurement of quantities, but lump sum or cost plus could be used
18
1999 Red Book (continued)
No Clause 67 Engineers decision
If a dispute arises, reference to DAB
Dispute resolution procedure is: adjudication (DAB)>>>amicable settlement >>>arbitration
19
The 1999 Yellow Book
For E&M plant, and for building and engineering works, designed by the Contractor
Needs of modern multi-discipline contracts recognised
Partial Employer design: include in Employers Requirements
20
1999 Yellow Book (continued) Valuation and payment based on lump
sum with payment plan, but remeasurement possible
No Clause 67 Engineers decision If a dispute arises, reference to DAB Dispute resolution procedure is:
adjudication (DAB)>>>amicable settlement >>>arbitration
21
The Silver Book(EPCT Contract)
More certain final price and time required- balance of risk being changed- privately financed BOT type
Contractor asked to cover extra risks Employer will have to pay more Completely new Book - unbalanced risk BUT full open acceptance of risk picture Starting point for BOT type projects
22
The Silver Book (continued) The EPCT Contract is suitable for:
particularly E&M and process plant projectsall types of Employerscivil law jurisdictionswhere government employer or private
developer wants a fixed price turnkey basis and two-party approach
There is an Introductory Note of explanation
23
Special Features of the Silver Book
Responsibility for design lies with Contractor Employers Requirements usually a
performance specification (functional basis) Contractor carries out all engineering,
procurement, construction, ready for operation at the turn of a key
No Engineer - instead the Employer Lump Sum Contract Price (but adjustments in
limited specified cases)
24
Special Features (continued) Testing procedures to demonstrate
achievement of specified end result Contractor carries majority of risks, so
Employer pays more Final price and time should be more certain Small number of tenderers with negotiation Contractor given freedom to use own
methods Has to prove reliability and performance
25
Special Features (continued) These Conditions are not suitable in the following
circumstances: if time or information is insufficient before Contract
signature if considerable work underground or difficult to
inspect if Employer intends to supervise closely or control
or review if an intermediary certifies interim paymentswhere part of the Works is designed by Employer for public bidding without negotiations
For such circumstances P&DB should be used instead
26
The Green Book(Short Form of Contract)
US$ 500,000 and six months duration Simple and repetitive works All provisions necessary in 15 clauses Language uncomplicated and simple Balanced risk sharing - no Engineer Design by either party - all types of
construction Payment on lump sum or any other basis
27
Dredging and Reclamation
Design by Employer or Contractor Valuation all main methods available Engineer required to act fairly in
accordance with Contract No defects liability on dredging Special insurance provisions Adjudication by DAB, then arbitration
28
Red Book MDB Harmonised Version
Based on 1999 Red Book Incorporates main common changes
normally required by MDBs, e.g.- audits, labour provisions, corruption avoidance, dispute settlement
Use subject to Licence Agreement between FIDIC and participating banks
29
Design, Build and Operate Projects
Conditions of Contract for Design, Build and Operate Projects (Gold Book), First Edition 2008
Assumes ~20-year operation period Modern approach to risk and insurance Employers Representative Adjudication by DAB, then arbitration
30
Subcontracts
Conditions of Subcontract for Construction, Test Edition 2009
Intended for use with 1999 Red Book General Conditions Particular
Conditions Annexes require provision of relevant
information
31
Protection of the Environment
The Contractor shall take all reasonable steps to protect the environment (both on and off the Site) and to limit damage and nuisance to people and property resulting from pollution, noise and other results of his operations
32
Environment (continued)
The Contractor shall ensure that emissions, surface discharge and effluent from the Contractors activities shall not exceed the values indicated in the Specification, and shall not exceed the values prescribed by applicable Laws
33
Project Phases
Initiation Study and Evaluation Design Development Detailed Design Contracts Construction, Manufacture, Shipping,
Installation, Testing and Commissioning Operations and Maintenance
34
Initiation
The Concept
The Big Decisions
Policy
Major Choices
35
Study and Evaluation
Feasibility
Alternatives
Strategy
Statutory Requirements
36
Design Development/Detailed Design
Specifications
Special Requirements
Approvals
Inclusion of results/outcomes from earlier Project Phases
Contracts Committee
Mandate from Executive Committee Members: Christoph Theune/ Zoltn
Zhonyi/Philip Jenkinson Special Advisers: Nael Bunni/ Axel Jaeger/
Michael Mortimer-Hawkins/ Chris Seppala/ Chris Wade
Task Group Leaders and Members
37
Contracts Committee Terms of Reference
To recommend to the Executive Committee which Conditions of Contract and related documents should be prepared or updated by FIDIC
To assist the Secretariat in establishing Task Groups as required, to monitor their work at agreed intervals and to carry out a final review of the documents for submission to the Executive Committee
To assist the Secretariat in handling queries on the interpretation of documents
To liaise, in conjunction with the Secretariat, with organisations interested in the FIDIC Conditions of Contract
To suggest topics and speakers as appropriate for seminars and workshops
38
Current Workload TG1 DBO Form of Contract TG2 Procurement Procedures Guide TG4 Consultancy Agreements TG5 Subcontract Form (Red Book) TG6 Update of 1999 Suite (Yellow Book first) TG7 Update of Dredging Contract (with IADC) TG8 Update of Short Form (Green Book) TG9 YB/SB Subcontract Forms TG10 Tunnelling (proposed, with ITA) TG11 ODB Form of Contract Training Courses
39
Workshop 4FIDIC Contracts (Update on New Documents)Annual Conference 2011Contracts WorkshopAn Overview of the FIDIC FORMS OF CONTRACTand Contracts Committee Activities ObjectivesConsultancy AgreementsThe Traditional FIDIC Forms of Contract BasicsFair and balanced approachThe Orange Book The 1999 Suite of Standard Conditions of ContractPrinciples behind the1999 BooksPrinciples (continued)Principles (continued)Principles (continued) General Remarks on the 1999 BooksGeneral Remarks (continued)The 1999 Red and Yellow Books The 1999 Red Book1999 Red Book (continued)The 1999 Yellow Book1999 Yellow Book (continued)The Silver Book(EPCT Contract)The Silver Book (continued)Special Features of the Silver BookSpecial Features (continued)Special Features (continued)The Green Book (Short Form of Contract)Dredging and ReclamationRed Book MDB Harmonised VersionDesign, Build and Operate ProjectsSubcontractsProtection of the EnvironmentEnvironment (continued)Project PhasesInitiationStudy and EvaluationDesign Development/Detailed DesignContracts CommitteeContracts Committee Terms of ReferenceCurrent Workload